RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

by Dave Toth

Today’s recovery above a very minor corrective high at 102.72 from last Tue confirms a bullish divergence in very short-term momentum.  This minor mo failure defines Thur’s 97.10 low as one of developing importance and a mini risk parameter from which very short-term traders with tighter risk profiles can objectively base non-bearish decisions like short-covers and cautious bullish punts.  A relapse below 97.10 will obviously reinstate the past six weeks’ meltdown and expose indeterminable losses thereafter.

This very minor momentum failure is of an INsufficient scale however to conclude anything more than another corrective hiccup within the major reversal from 31-Mar’s 127.32 high.  Indeed, a recovery above 05-May’s 107.52 corrective high remains required to break the (suspected 3rd-Wave) decline from 19-Apr’s 123.07 high, let alone threaten the broader collapse from 31-Mar’s 127.32 high.  Per such, this 107.52 level remains intact as our short-term risk parameter the market is minimally required to recoup to confirm a bullish divergence in daily momentum sufficient for most traders to neutralize bearish exposure and for even longer-term commercial players to pare exposure to more conservative levels.  Until and unless this market recovers above at least 107.52 and preferably 05-Apr’s (suspected 1st-Wave) low at 112.20, this recovery attempt is advised to first be approached as a (4th-Wave) correction within an eventual and broader 5-wave sequence down to new lows below 97.10.

Worthy of note is the sharp drop over the past six weeks in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC.  This drop from 89% to 63%, its lowest level since Aug’20, evidences the capitulation of the Managed Money community’s long-&-wrong exposure following 31-Mar’s bearish divergence in momentum and a bearish count introduced discussed in 04-Apr’s Technical Blog.  The combination of a bullish divergence in daily momentum above 107.52 and this return to a relatively historically bearish level in our RJO BSI would have to be respected as an early indication or threat or a bigger rebound.

Finally and still, the market’s recent foray into the upper-quarter of its historical range provides another peak/reversal-threat element just like it did heading into last summer.  We know that in the vast majority of years, this market has a seasonal tendency to traders lateral-to-lower from the Jun/Jul period onward.  On the heels of the past six weeks’ drubbing performance, and until or unless this market can sustain trendy, impulsive behavior above at least 107.52, these technical elements still favor lateral-to-lower prices in the weeks and months ahead and the prospect that any recovery attempts are likely corrective selling opportunities.

These issues considered, very short-term traders are OK to move a neutral/sideline position as a result of today’s bullish divergence in very short-term momentum.  A relapse below 97.10 is required to negate this call and re-expose the bear.  Otherwise, a bearish policy and exposure remain advised with a recovery above 107.52 required for short-term traders to move to the sidelines and for longer-term commercial players to pare exposure to more conservative levels, with commensurately larger-degree strength above 112.20 required to neutralize remaining exposure.  In lieu of a recovery above 107.52, this recovery attempt as advised to first be approached as another corrective selling opportunity.

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